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In: Economics

Q.1) India and China have made rapid progress over the past three decades yet certain structural...

Q.1) India and China have made rapid progress over the past three decades yet certain structural bottlenecks need to be removed if these countries expect to keep growing hindered. Discuss this assertion, discussing the structural weaknesses faced by these countries

Expert Solution

TILL THE LATE 1970'S INDIA AND CHINA WERE MAINTAINING THE SAME LEVEL OF DEVELOPMENT.INDIA,WITH HER DEMOCRATIC INSTITUTIONS,PERFORMED MODERATELY WELL. MAJORITY OF PEOPLE (AROUND 60%) STILL DEPENDS ON AGRICULTURE.INFRASTRUCTYRE DEVELOPMENT NEEDS FURTHER EXPANSION.NEARLY ONE FOURTH OF INDIA'S POPULATION LIVES BELOW THE POVERTY LINE.

THE REFORMS UNDER TAKEN BY CHINA IN FACT WITHOUT ANY EXTERNAL INFLUENCE LIKE IMF,IBRD/WB,PRODUCED EXCELLENT RESULTS.CHINA HAS USED MARKET MECHANISM WITHOUT LOSING POLITICAL COMMITTMENT AND HAS SUCCEEDED IN RAISING THE LEVEL OF GROWTH ALONG WITH ALLEVIATION OF POVERTY.

SOME STRCTURAL PROBLEMS FACED BY INDIA ARE THE FOLLOWING.

1)LOW SAVING RATE ( AROUND 30% OF GDP)

2) UNDER DEVELOPED MONEY MARKET.IN MANY RURAL AREAS MONEY LENDERS ARE THE CHIEF PLAYERS.

3) UNDER DEVELOPED CAPITAL MARKET.

4)LACK OF DIGITILIZATION OF CURRENCY.

5)BREAKING THE GROWTH PATTERN.THAT IS , SERVICE SECTOR FULLY DEVELOPED WITHOUT FULLY DEVELOPING INDUSTRIAL AND AGRICULTURAL SECTOR.

6) AROUND 65% OF FARMING DEPENDS ON RAIN FALL.

7)AROUND 70% OF POPULATION DEPENDS ON AGRICULTUTE EITHER DIRECTLY OR INDIRECTLY.

8)INSUFFICIENT ENERGY PRODUCTION

9)MIDDLE MEN ARE THE MAIN PLAYERS IN THE MARKET,NEITHER THE PRODUCER NOR THE CONSUMER.

10)DEVELOPMENT IS CONFINED TO CERTAIN INDUSTRIES AND CERTAIN LOCALITIES.

SOME STRUCTURAL PROBLEMS FACED BY CHINA ARE THE FOLLOWING.

1) AUTOCRATIC GOVERNMENT.

2)LACK OF POLITICAL AND RELIGIOUS FREEDOM.ONLY ECONOMIC LIBERTY TO THE PEOPLE.

3)OVER PRODUCTION

4) NEGLECTING ENVIRONMENTAL STANDARDS.

5)EXPLOITATION OF NATURAL RESORCES.

6)YUAN STILL NOT BECOME A SUBSTITUTE FOR US DOLLAR.

7)OVER EXPENDITURE ON SOCIAL OVERHEAD CAPITAL.

8)ORIGIN OF MANY EPIDEMIC DISEASES OVER DECADES.

9)VAGUE PICTURE OF REAL CHINA TO THE OUTSIDE WORLD.

10)AN AGGRESSIVE NATION ALWAYS.

DESPITE THESE STRUCTURAL PROBLEMS, BOTH INDIAN AND CHINA HAVE STRONG DOMESTIC MARKET. CHINESE DOMESTIC MARKET IS MORE STRONGER THAN INDIA'S. THE CORONA CRISIS HAMPERS GLOBAL GROWTH RATE. IN 2020, GDP GROWTH RATE OF ADVANCED COUNTRIES WILL FALL BY -8 AND FOR DEVELOPING ECONOMIES LIKE INDIA IT WILL FALL TO -5 .BUT FOR CHINA IT IS +1. SO CHINA IS THE ONLY COUNTRY IN THE ENTIRE WORLD TO HAVE A POSITIVE GROWTH RATE IN 2020. THIS SHOWS THE STRENGTH OF CHINESE ECONOMY EVEN IF IT IS DECLINING NOW.

Rahul Sunny answered 1 year ago

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